Aramco IPO likely to kickoff today; Saudi Crown Prince gives green light to profitable firm: Report

  • Aramco, which pumps about 10 percent of the world's crude oil, emerged as the world's most profitable company in 2018

  • To achieve $2 trillion, in the largest IPO in history, Riyadh needs the initial listing of a 1 percent-2 percent stake on the Saudi stock market to raise at least $20 billion-$40 billion.

  • Crown Prince Mohammed wants to eventually list a total of 5 percent of the company

Energy giant Aramco's initial public offering may be announced today.

Saudi Arabia's Crown Prince Mohammed bin Salman on Friday agreed that the initial public offering of state oil giant Aramco will be announced today (3 November), five sources familiar with the matter told Reuters. But the IPO will make its long-awaited debut on the Riyadh stock market on 11 December, according to AFP.

"Aramco IPO will begin on 4 December," at which point investors can subscribe to the giant offering, the sources said, adding that the shares would then start trading on the Saudi Tadawul exchange on 11 December.

"The crown prince finally gave the green light," one source said, Reuters said.

Aramco declined to comment.

Earlier, on Wednesday, the Gulf kingdom’s energy minister had announced: The much-awaited IPO of Aramco will come “soon”, according to PTI.

“It will be a Saudi decision, first and foremost. Specifically, Prince Mohammed’s decision,” he said, referring to powerful Crown Prince Mohammed bin Salman.

The IPO forms the cornerstone of a reform programme conceived by the kingdom's de facto ruler Crown Prince Mohammed bin Salman to wean the Saudi economy off its reliance on oil. But there have been various delays since it was first announced in 2016.

Aramco, which pumps about 10 percent of the world’s crude oil, emerged as the world’s most profitable company in 2018.

 Aramco IPO likely to kickoff today; Saudi Crown Prince gives green light to profitable firm: Report

General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. Reuters

Saudi Aramco officials and advisers have held last-minute meetings with investors over the past few days in an attempt to achieve as close to a $2 trillion (£1.55 trillion) valuation as possible ahead of an expected listing launch on Sunday, according to sources.

The final meeting by the Saudi government on Friday evening was to decide whether to go ahead with the listing.

To achieve $2 trillion, in the largest IPO in history, Riyadh needs the initial listing of a 1 percent-2 percent stake on the Saudi stock market to raise at least $20 billion-$40 billion.

Aramco was expected to launch the first part of a two-stage IPO earlier in October, but decided to push the trading date back to December or January, reportedly to factor in quarterly earnings, and also amid problems with the valuation.

Prince Mohammed wants to eventually list a total of 5 percent of the company. An international sale is expected to follow the domestic IPO.

Aramco meets investors in last-minute bid to hit $2 trillion IPO target

Saudi Aramco officials and advisers were holding last-minute meetings with investors in an attempt to achieve as close to a $2 trillion (£1.5 trillion) valuation as possible ahead of an expected listing launch on Sunday, three sources told Reuters.

The main sticking point remains the $2 trillion valuation, which has often been considered too ambitious by advisers and some insiders, according to the three people. A valuation closer to $1.5 trillion is more likely, with wealthy Saudi families the main investors in the IPO, they said.

Saudi Arabia is separately still holding government-to-government meetings to attract investment from sovereign wealth funds, the investor added.

The state-owned oil major has also approached governments in the Gulf and Asia, including China, to try and secure the bulk of the investment from countries on friendly terms with Saudi Arabia, as the reception elsewhere has been cooler, sources have previously said.

Dividend payout

The listing is the centrepiece of the crown prince's plan to shake up the Saudi economy and diversify away from oil. But there have been various delays since the 2016 announcement. A launch is now expected on Nov. 3, sources have previously said.

Aramco has said it will pay a base dividend of $75 billion, which at $2 trillion would mean a dividend yield of 3.75 %, below those already offered by competitors like Exxon Mobil Corp and Royal Dutch Shell .

Shell's dividend yield is over 6 percent and Exxon's over 5 percent, according to Refinitiv data.

Oil majors have been raising payouts to shareholders over the past years to counter rising pressure from climate activism on investors to dump oil stocks and help the world switch to cleaner fuels, such as wind and solar.

To achieve $2 trillion, in the largest IPO in history, Riyadh needs the initial listing of a 1 percent-2 percnt stake on the Saudi market to raise at least $20 billion-$40 billion.

Prince Mohammed wants to eventually list a total of 5 percent of the company. An international sale is expected to follow the domestic IPO.

The close relationship between the new Aramco chairman Yasser al-Rumayyan, who also heads the PIF, the kingdom’s sovereign wealth fund, with the crown prince was a governance concern of some investors, the sources said.

The PIF (Public Investment Fund) will use the proceeds of the Aramco IPO sale to deliver on the prince's ambitious domestic and economic reforms.

--With inputs from agencies

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Updated Date: Nov 03, 2019 08:31:54 IST